US Markets Starting To Look Like A 'Banana Republic'? | New Harbor Financial

**John Lodra** (0:00)
But we've seen quite the opposite. There's been a massive spike higher on a relative basis in bond yields, and therefore bonds have not provided the safety. And then the dollar, which normally will rally as a safe haven currency, when the global financial markets are in crisis, has actually gotten pummeled quite dramatically. These are the kinds of things you see in a emerging markets that's going through a balance of payments crisis, a currency crisis. This is not what normally you see in quality United States. And I think a lot of this is policy driven.

**Adam Taggart** (0:40)
Welcome to Thoughtful Money. I'm its founder and your host, Adam Taggart. Welcoming you here back with another monthly check-in with the team at New Harbor Financial. They're one of the endorsed financial advisory firms by Thoughtful Money. They come on this channel with me every week to make sense of what the markets have been up to on a weekly basis, but we've started this new process of having them on once a month to kind of just do a deeper dive in terms of how they see the world. And gentlemen, there's been no shortage of things to focus on since your last appearance here. They've got that expression, was it April is the cruelest month, I think? Hopefully, I'm not confusing that with August. But it has been a crazy month, a lot of whipsawing, a lot of uncertainty, inflaming emotions, which we're going to talk about in just a moment. But folks, as usual, I'm joined by John Lodra and Mike Preston, the senior partners there at New Harbor Financial. John, why don't we start with you? When we were getting ready to turn the cameras on here, you said that we're starting to see the markets behave in the US., at least, in the way that you oftentimes will see them behave in emerging markets, those kind of banana republic type markets. Do you want to elaborate on that?

**John Lodra** (1:53)
Yeah. So Adam, great to be with you and hello everybody. Thanks for tuning in. April has been a tremendously uncertain and volatile month, not just in the data, but in the emotions. In our work, we deal with real people. And even though our client accounts have been rather stable, we've done a very good job at protecting and mitigating a lot of this volatility. It doesn't change the emotional angst that we humans are destined to feel, because it is a very uncertain time. Howard Marks, legendary credit investor, I think, put it best. He recycled the title he's used only a few times in history, this in his recent memo called Nobody Knows. And the reality is, we have a situation here where there are self-inflicted changes from a policy standpoint that are just curveballs left and right, walking forward and back in different corners. And if there's one thing that markets and humans hate is uncertainty. It's a scary concept for human beings. I'd like to share just a picture that appeared in a recent Financial Times article. And I think this puts in the context, when I talked about the US kind of behaving like an emerging market, Banana Republic, what this shows is it shows the recent kind of kind of moves under Trump so far in red, both with stocks, bond yields, and the US dollar. And it compares it to the crises in the COVID pandemic and the global financial crisis. And normally what you would see, so we, everybody knows it's got a pulse that the stock market sold off pretty healthily. In fact, we, during April, reached the definition of a bear market over 20 percent pullback. Just from the top, even in April alone, I think at one point the market was down over 10 percent, I think the worst since 1929 So definitely the market has fallen. But usually when you see that happen, you see bond yields drop as well as there's a flight to safety and treasury bonds. Because when bond yields fall, bond prices go up. But we've seen quite the opposite. There's been a massive spike higher on a relative basis in bond yields, and therefore bonds have not provided the safety. Then the dollar, which normally will rally as a safe haven currency, when the global financial markets are in crisis, has actually gotten pummeled quite dramatically. These are the kinds of things you see in a emerging markets that's going through a balance of payments crisis, a currency crisis. This is not what normally you see in the quality of the United States. I think a lot of this is policy driven. When you get such uncertain liberation date, everybody knew Trump was going to be announcing some tariffs. That was April 2nd. We'll get into some charts in a little bit that shows what the month actually did. But what came out in April, on April 2nd, was far more punitive and dramatic than what anybody thought. If you look at a chart of tariff history in the United States, it blew away like where the headline terrorists were in the Smoot-Hawley era in the Great Depression.